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Article
Publication date: 17 August 2020

Yawei Fu and Sin Huei Ng

The purpose of this paper is twofold to examine the factors that contribute to local bias of venture capital in China and to explore the relationship between local bias

Abstract

Purpose

The purpose of this paper is twofold to examine the factors that contribute to local bias of venture capital in China and to explore the relationship between local bias and performance of venture capital institutions.

Design/methodology/approach

Local bias was measured in line with the model developed by Cumming and Dai (2010). Regression techniques were performed for our long-term cross-sectional data to analyse the potential determinants of local bias. This is followed by the Probit model to test the relationship between local preference and successful exit.

Findings

The overall finding indicated that local bias in China increased over time. The stiff competition among venture capital institutions reduced local bias, but the enhanced innovation capabilities of a particular geographical area amplified local bias because of the knowledge spillover effect. Finally, the results suggested that venture capital institutions with less local bias enjoy a greater likelihood of making successful exits.

Research limitations/implications

This study used successful venture capital exit as a proxy for venture capital institution’s performance because of the unavailability of information such as internal rate of return. Future research should try to adopt other way of measuring venture capital institution’s performance.

Practical implications

This study sheds light on the various possible causes of local bias that the policymakers need to be aware of. Despite the rapid rise of China’s venture capital market in recent years, venture capital institutions have yet to make inroads into the local high-tech industry. This study implies to the policymakers that to reverse this trend, they should formulate policies that foster the long-term performance of venture capital institutions, mitigate the severity of local bias and raise the competitiveness of the Chinese venture capital market.

Originality/value

Because of data limitations, there is currently lack of prior empirical research on local bias of Chinese venture capital institutions based on large-scale data. This study intends to fill the gap.

Details

Journal of Asia Business Studies, vol. 15 no. 1
Type: Research Article
ISSN: 1558-7894

Keywords

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Article
Publication date: 5 March 2018

En Te Chen and Yunieta Anny Nainggolan

Despite the benefits of international diversification, the home equity bias phenomenon is well documented in the portfolio choice literature. The purpose of this paper is…

Abstract

Purpose

Despite the benefits of international diversification, the home equity bias phenomenon is well documented in the portfolio choice literature. The purpose of this paper is to investigate whether the same investment behavior applies to domestic socially responsible investments (SRIs) where ethical screenings should be the selection criteria.

Design/methodology/approach

The authors apply the model by Coval and Moskowitz (1999), Grinblatt and Keloharju (2001) and Agarwal and Hauswald (2010) to uncover the effect of distance relative to screenings on SRI domestic portfolio choice. For the first time, the authors test the robustness of distance effect by using time bias, which is the travel time between the fund manager and the company’s headquarter.

Findings

The authors find that SRIs exhibit a strong preference for locally headquartered firms. After controlling for screening activity and other fund characteristics, the authors still find a strong distance bias in SRI fund portfolio decision-making. The authors find that this bias is mostly observed in SRI fund with social screening and that fund holding characteristics determine the propensity of fund managers to invest locally. The results suggest that the local bias puzzle exists in SRI.

Research limitations/implications

This study provides avenue for future research to examine whether the same local bias is found in SRI investment in other countries where they have different characteristics and behavior. Also, the evidence that local bias exists in SRI investment may need further analysis as to whether this is conflicting with the objectives of SRI, which focus more on ethical beliefs.

Practical implications

The results suggest that many local firms in the same city currently held by an SRI fund will not be held by this fund if it is in another city. The implications of the findings are that geographic proximity, along with ethical screenings, is an important dimension to how SRI fund invests.

Originality/value

This study is the first that examines local bias in SRI funds by using portfolio holding data.

Details

Social Responsibility Journal, vol. 14 no. 1
Type: Research Article
ISSN: 1747-1117

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Book part
Publication date: 13 May 2017

David Card, David S. Lee, Zhuan Pei and Andrea Weber

A regression kink design (RKD or RK design) can be used to identify casual effects in settings where the regressor of interest is a kinked function of an assignment…

Abstract

A regression kink design (RKD or RK design) can be used to identify casual effects in settings where the regressor of interest is a kinked function of an assignment variable. In this chapter, we apply an RKD approach to study the effect of unemployment benefits on the duration of joblessness in Austria, and discuss implementation issues that may arise in similar settings, including the use of bandwidth selection algorithms and bias-correction procedures. Although recent developments in nonparametric estimation (Calonico, Cattaneo, & Farrell, 2014; Imbens & Kalyanaraman, 2012) are sometimes interpreted by practitioners as pointing to a default estimation procedure, we show that in any given application different procedures may perform better or worse. In particular, Monte Carlo simulations based on data-generating processes that closely resemble the data from our application show that some asymptotically dominant procedures may actually perform worse than “sub-optimal” alternatives in a given empirical application.

Details

Regression Discontinuity Designs
Type: Book
ISBN: 978-1-78714-390-6

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Article
Publication date: 18 October 2011

Shreesh Deshpande and Marko Svetina

Recent research on local bias provides evidence that investors' portfolios include a non‐negligible allocation to stocks in firms that are geographically proximate to the…

Abstract

Purpose

Recent research on local bias provides evidence that investors' portfolios include a non‐negligible allocation to stocks in firms that are geographically proximate to the investors. The reasons postulated for local bias include familiarity with firms, “word‐of‐mouth” communication effects, and ability to exploit local news. The purpose of this paper is to investigate the value‐relevance of local news, specifically earnings announcement surprises, in the context of the well‐documented local bias in investors' portfolios.

Design/methodology/approach

Using a hand‐collected panel dataset spanning 15 years of quarterly earnings announcements of publicly traded firms, abnormal stock returns engendered by earnings surprises based on local newspaper announcements are compared to those from earnings surprises based on financial analysts' forecasts (I/B/E/S).

Findings

In contrast to the case, when both sources of earnings surprises are negative, the authors find a statistically significant differential stock price effect in a sample where local firms' earnings announcements in the local newspaper signal positive earnings surprises, but the earnings surprise based on financial analysts' forecasts is negative. This result remains after controlling for time‐ and firm‐fixed effects. In additional tests, the authors establish that the result is predicated on a local firm's earnings announcement being reported in the local newspaper.

Originality/value

The paper's findings suggest that the results of empirical research on the information content of earnings surprises based solely on analysts' forecasts should be interpreted with caution. It was found that the stock price impact of earnings surprises is also significantly influenced by local newspaper reports of the announced quarterly earnings of local firms.

Details

Managerial Finance, vol. 37 no. 12
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 7 August 2017

Annie Tubadji, Masood Gheasi and Peter Nijkamp

An interest in social transmission as a source of welfare and income inequality in a society has re-emerged recently with new vigour in leading economic research (see…

Abstract

Purpose

An interest in social transmission as a source of welfare and income inequality in a society has re-emerged recently with new vigour in leading economic research (see Piketty, 2014). This paper presents a mixed Bourdieu-Mincer (B-M) type micro-economic model which provides a testable mechanism for culturally biased socio-economic inter-generational transmission. In particular, the operationalisation of this mixed B-M type model seeks to find evidence for individual and local cultural capital effects on the economic achievements, in addition to the human capital effect, for both migrants and locals in the Netherlands. The purpose of this paper is to examine two sources of wage differential in the local labour market, namely: individual cultural capital (approximated by immigrant background), which affects schooling results; and the local cultural capital (approximated with the cultural milieu), which directly biases the selection of employees.

Design/methodology/approach

The study utilises the 2007-2009 data set for higher professional education (in Dutch termed HBO) graduates registered in the Maastricht database. The Mincer-type equation is augmented with a control variable for the local cultural milieu. The authors cope with this model empirically by means of 2SLS and 3SLS methods.

Findings

The authors find convincing evidence for the existence of both an individual cultural capital and a local cultural capital effect on schooling and wage differentials. This can be interpreted as a migrant background effect leading to a disadvantaged position on the labour market due to less frequently attending high-quality secondary schools.

Originality/value

More importantly, the authors find evidence for a classical Myrdalian effect of self-fulfilling prophecy, in which graduates with second-generation migrant background have a disadvantaged position due to access only to poorer quality of schooling.

Details

International Journal of Manpower, vol. 38 no. 5
Type: Research Article
ISSN: 0143-7720

Keywords

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Article
Publication date: 8 July 2014

Shreesh Deshpande and Marko Svetina

In a setting with local bias in investors’ portfolios, the purpose of this paper is to study the stockholder wealth impact of negative earnings surprises for local firms…

Abstract

Purpose

In a setting with local bias in investors’ portfolios, the purpose of this paper is to study the stockholder wealth impact of negative earnings surprises for local firms as reported in a local newspaper.

Design/methodology/approach

In the sample of earnings announcements, the authors observe that the stock price impact is statistically significantly more (less) negative in the case where the absolute difference between announced earnings and the consensus analysts’ forecast is greater (smaller) than the absolute difference between the announced earnings and last-year-same-quarter earnings.

Findings

The differential effect is only observed when the stock market uncertainty (VIX) is high. In the empirical analysis, the paper finds that investors’ reactions to negative earnings surprises appear to be influenced by the level of historical, publicly available last-year-same-quarter earnings.

Originality/value

When stock market uncertainty is high, the result suggests that the stock market may not be semi-strong efficient and/or that there is a behavioral response to negative earnings surprises in a setting where investors have portfolios over-weighted with local firm stocks.

Details

Managerial Finance, vol. 40 no. 8
Type: Research Article
ISSN: 0307-4358

Keywords

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Book part
Publication date: 2 September 2010

R. Greg Bell, Igor Filatotchev and Abdul A. Rasheed

Liability of foreignness (LOF) has been one of the central constructs in the field of international business and management. Over the past two decades, a significant body…

Abstract

Liability of foreignness (LOF) has been one of the central constructs in the field of international business and management. Over the past two decades, a significant body of theoretical and empirical research has accumulated, theorizing on the sources of these LOFs, investigating their magnitude, and prescribing approaches to mitigate these disadvantages. However, much of this research is almost exclusively related to firms expanding their products, services, and operations to other countries as part of their global expansion. The difficulties firms face in foreign product markets is just one dimension of the costs they can face in their attempts to secure resources abroad.

We expand the domain of the LOF construct to include liabilities faced by firms accessing foreign capital markets in light of the increasing integration of capital markets. We identify four sources of LOF in capital markets: regulatory costs, information costs, unfamiliarity costs, and costs arising out of cultural differences. Based on an extensive review of “home bias” in equity markets, we propose four strategies to erase the legitimacy deficits that firms encounter in foreign capital markets: bonding, signaling, adoption of business practices isomorphic with the host country, and certifications and endorsements by third parties. We also offer suggestions for operationalizing and measuring LOF in capital markets as well as several directions for advancing further research on LOF in the context of capital markets.

Details

The Past, Present and Future of International Business & Management
Type: Book
ISBN: 978-0-85724-085-9

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Article
Publication date: 7 January 2014

Caroline S. Hossein

Bad governance and corrupt politics have left millions of people disenfranchised. In spite of an oppressive and undemocratic state, poor Haitians have created their own…

Abstract

Purpose

Bad governance and corrupt politics have left millions of people disenfranchised. In spite of an oppressive and undemocratic state, poor Haitians have created their own informal groups, cooperatives and caisses populaires (credit union) movements – a testimony to the democratic spirit of the poor masses. The paper aims to discuss these issues.

Design/methodology/approach

A mixed qualitative study using interviews, surveys, focus groups, ethnography techniques and literature review.

Findings

Lenders who run the caisses populaires are not class or race biased; they understand how to make microfinance assist the marginalized poor in a society segregated by class and race. Cooperatives and credit unions (called caisses populaires in Haiti) are able to reach hundreds of thousands of people.

Originality/value

These lenders one or two generations removed from the people they serve understand their reality and take careful steps and plan in a way to ensure their loans are structured to be socially inclusive. In fact, black microfinance lenders, as well as whitened local elites and foreigners, have a socially conscious philosophy of using microfinance as a vehicle to ensure economic democracy for the masses. In doing this, they take personal risks. The ti machanns recognize these efforts and as a result trust these credit programs.

Details

International Journal of Social Economics, vol. 41 no. 1
Type: Research Article
ISSN: 0306-8293

Keywords

Content available
Article
Publication date: 28 July 2020

Ge Yang and Shutian Cen

Over the past 20 years, China's infrastructure has developed at an extraordinary speed. The current literature mainly focuses on the effects of political incentives on the…

Abstract

Purpose

Over the past 20 years, China's infrastructure has developed at an extraordinary speed. The current literature mainly focuses on the effects of political incentives on the infrastructure. However, this paper indicates that the structural change of China's land regime is an important clue and that the supernormal development of China's infrastructure is an explicable result for that.

Design/methodology/approach

This paper theoretically proves that in a politically centralized and economically decentralized economic entity with a public land-ownership regime, the self-financing mechanism formed by local officials through regulation of the land-grant price is the primary factor that influences the optimal supply volume of infrastructure in a region, in addition to political and economic incentives, and whether the self-financing mechanism can be formed or not depends on the structure of a country's land regime, which can help to explain the difference between the development of infrastructure in China and that in other developing countries from a theoretical angle.

Findings

The paper suggests that the mode is facing an important transformation toward land reform and new-type urbanization construction, and the replication and promotion of China's experience in infrastructure construction are of further significance under the Belt and Road Initiative as it provides a method for helping developing countries to eliminate infrastructure bottlenecks.

Originality/value

Through the test of multinational panel data, the paper indicates that the structural change of China's land regime around 1990 had an overall effect on the supernormal development of infrastructure in China. The paper indicates that the “land-based development mode” of China's infrastructure indeed contributed to the supernormal development of infrastructure in China, but there are still some shortcomings in this mode.

Details

China Political Economy, vol. 3 no. 1
Type: Research Article
ISSN: 2516-1652

Keywords

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Article
Publication date: 13 November 2017

Hakwoon Kim and Jooyoung Kim

The purpose of this paper is to investigate the role of geographic distance in crowdfunding.

Abstract

Purpose

The purpose of this paper is to investigate the role of geographic distance in crowdfunding.

Design/methodology/approach

Under the assumption that investors are more likely to be attracted to local borrowers, this paper investigates whether this phenomenon is because of affinity or an informational advantage. The authors define a local investor as an investor who is from the same US state as the borrower.

Findings

The paper finds that loans offered by local investors have lower interest rates and a lower default probability. In addition, when the level of local investment is highest, the effects of informational advantage are strengthened.

Research limitations/implications

Overall, the evidence of this paper suggests that local investors have an informational advantage over more geographically distant investors.

Originality/value

This paper contributes to the ongoing debate regarding whether geographic distance continues to be important in the internet age.

Details

Review of Accounting and Finance, vol. 16 no. 4
Type: Research Article
ISSN: 1475-7702

Keywords

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